Greek Banks Draw Investors Betting on Recoveries: Piraeus

A pedestrian passes a closed branch of Piraeus Bank SA in Athens. Piraeus, the country’s second-biggest bank by assets, last month raised 1.75 billion euros ($2.4 billion) in new capital from foreign investors in the latest sign Greek lenders are bouncing back from the sovereign-debt crisis. Photographer: Kostas Tsironis/Bloomberg

April 7 (Bloomberg) -- International investors have started
placing money into Greek banks as they anticipate the improving
economy will boost profits across the industry, Michalis Sallas,
chairman of Piraeus Bank SA, said.

As the country’s deficit narrows and output stabilizes,
banks are likely to recover more than they previously projected
from struggling borrowers, Sallas said in an interview.

“The prospective reduction of non-performing loans and the
continuing decline of deposit rates in Greece mean that profits
will rise significantly,” the 63-year-old banker, said at his
office in downtown Athens last week.

Piraeus, the country’s second-biggest bank by assets, last
month raised 1.75 billion euros ($2.4 billion) in new capital
from foreign investors in the latest sign Greek lenders are
bouncing back from the sovereign-debt crisis. It also sold 500
million euros of three-year bonds on March 18 in the first
public debt sale from a Greek lender since 2009, according to
data compiled by Bloomberg.

“Those who invest in Greece are not just looking for
short-term gains,” Sallas said. “They include institutional
investors, like pension funds and big, long-only funds.”

The Greek economy will probably receive a further boost
next year when banks complete their de-leveraging and begin to
increase lending to companies and consumers, said Sallas, who
trained as an economist in Germany.

Schaeuble Talks

Greece, whose debt load is close to 180 percent of gross
domestic product, or about 326 billion euros, has narrowed its
budget deficit as a condition of the rescue program, backed by
euro-area states and the International Monetary Fund. The
government and EU predict that Greece will emerge in 2014 from
six years of recession and German Finance Minister Wolfgang
Schaeuble last week said euro-area governments are discussing
ways to boost growth in the bloc’s most indebted nation.

“We see a real improvement, especially when it comes to
fiscal discipline, but we need to do more to bolster the
competitiveness of Greek companies,” Sallas said. “Domestic
consolidation is necessary to create economies of scale and
companies which can compete in the international markets.”

Greek Finance Minister Yannis Stournaras said earlier this
month his country is preparing for a small issuance of three- or
five-year bonds, in the first semester of this year.

“Everything indicates that this inaugural bond issue of
the Greek state will have a positive reception from
international investors, underscoring their confidence in
economic recovery,” said Sallas, a former government official
and chairman of the stock exchange.

Capital Increase

On March 26, Piraeus said it placed 1.03 billion new
ordinary shares at 1.70 euros each, after a stress test
conducted by the country’s central bank identified a capital
shortfall of 425 million euros.

Sallas, whose bank has taken over six other lenders in the
last 18 months, said Piraeus has set aside 14 billion euros to
cover 27 billion euros of troubled credits, amounting to about a
third of its loan book. He says his bank probably won’t need
additional capital after the European Central Bank asset quality
review and stress-test later this year.

“The Bank of Greece applied a very conservative approach,
and, I believe, has taken precautions to align its methodology
with that used by the European Central Bank,” he said. “In any
event, in Piraeus we have sufficient buffers to accommodate any
eventuality.”